Pros and Cons of Sole Proprietorship in India

Pros and Cons of Sole Proprietorship in India

Pros and Cons of Sole Proprietorship in India

A sole proprietorship is the simplest form of business entities to start and is owned by one person. It is also the oldest form of business organization. In a sole proprietorship, it is the privilege and the responsibility of the owner to manage the affairs of his company.

He needs to take decisions in all aspects including managerial, financial and others to ensure efficiency and profitable conduct of business. Sole proprietorships are attractive for small business owners because of its straight forward process. Here, the proprietor becomes personally accountable for any losses or money owed. In case of any change, it's simple to modify the legal structure of the company.

Sole proprietorship comprises numerous positive points; some of them are given below:

Simplified Legal Formalities

The best part of a sole proprietorship is that there is no separate law to govern it. It does not need incorporation or any kind of registration; a license is only needed to carry out the desired business. And, like its formation process, there is no legal process involved in its closure as well. Enjoy the ease of doing business with minimum hassles under the sole proprietorship.

Concession in Tax

 The owner of a sole proprietorship does not have to file a separate business tax report. Instead, he lists all the data and figures about his business in his individual tax return. It saves additional costs on accounting and tax filing. The kind of business entities is taxed according to the rates applied to personal income.

Complete Control of the Business

In this business, the owner controls everything and does not have to take approval of a board of directors, stockholders or anyone else. All the hiring and firing and other important decisions are controlled by a single person.


Privacy is a plus point for this type of business organization. Since a sole proprietor does not submit any documents related to the business formation or annual reports to any government or authority, the business operations do not come in public disclosure like an LLC or corporation.

Maximum Profit

Another clutch advantage of a sole proprietorship is that the owner can keep all the profits to himself. While in another form of business profits are divided among themselves or with the shareholders.

Easy Banking

Sole proprietorships are the unique kind of business entity that enjoys simplified banking as it doesn't require a business checking account in order to operate a company.  As a sole proprietorship, though, one can make and accept business payments straight from his own personal bank accounts. A business owner does not have to go through the process of finding a business checking account, or figure out how to set up business banking in general.

The advantages of a sole proprietorship are multifarious, but that doesn't mean that they are free from the disadvantages and right for everyone or every business. It has pitfalls as well.


  • The owner of Sole proprietorship rarely take holidays
  • Making day-to-day business decisions go in the hand of businessman
  • The owner is taxed as a single person
  • The law under sole proprietorship does not distinguish between the personal assets of the owner and the assets of the business.
  • His life gets limited around business

Starting a business as a sole proprietorship has several advantages. Though, the decision should be taken after considering the circumstances, available financial backup after and before investment, the needs of personal asset protection and the tax situation as well.

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